Northwest Side Housing Preservation Ordinance

Chicago’s Northwest Side Housing Preservation Ordinance Frequently Asked Questions (F.A.Q.)

Updated December 5, 2024

  • Click here to download the final substitute ordinance adopted by the Chicago City Council on September 18, 2024.
  • Click here to download the amendments to the ordinance introduced on December 2, 2024.

Alderpeople Carlos Ramirez-Rosa (Ward 35), Daniel La Spata (Ward 1), Byron Sigcho-Lopez (25), Jessie Fuentes (Ward 26), Ruth Cruz (Ward 30), Felix Cardona (Ward 31), and Rossana Rodriguez-Sanchez (Ward 33) introduced the Northwest Side Housing Preservation Ordinance to the Chicago City Council on July 17, 2024. The Chicago City Council passed the ordinance on Wednesday, September 18, 2024.

Chicago's most significant source of “naturally occurring” affordable housing in neighborhoods such as Avondale, Hermosa, Humboldt Park, Logan Square, and West Town are two-flat, three-flat, and four-flat apartment buildings. However, our communities are losing our two- to four-flat apartment buildings to demolition and conversion to luxury single-family homes. The loss of this naturally occurring affordable housing leads to higher rents, higher property taxes, and under-enrolled schools. That's why our broad coalition of Northwest Side alderpeople and community organizations worked to pass the Northwest Side Housing Preservation Ordinance.

The ordinance promotes housing affordability and helps prevent the displacement of low- and moderate-income families in the Northwest Side neighborhoods of Avondale, Hermosa, Humboldt Park, Logan Square, and West Town.

Following the passage of the Northwest Side Housing Preservation Ordinance in September, the Chicago Association of REALTORS® reached out to begin a collaborative process on implementation and potential changes. We’re proud that our constructive dialogue and collaboration has led to an agreement on the following sensible amendments to the ordinance:

  • Sunset provision and study requirement – In accordance with this program's pilot nature, the Tenant Opportunity to Purchase (T.O.P.) will sunset on December 31, 2029, alongside the demolition surcharge. This sunset will be accompanied by a study from the Chicago Department of Housing, providing the Chicago City Council with the opportunity to determine the best manner to proceed with T.O.P. and the other provisions of the ordinance.
  • Clear guidance for tenants and sellers on financial viability – The updated language clearly states that tenants must provide a pre-approval from a lender for buildings with four or fewer units or a letter of intent from a lender or community organization for five or more units in order to exercise their right of first refusal. 
  • Clear guidance for tenants and sellers on the right of first refusal waiver and renewal of rights – The updated language makes it clear that the seller or their agent may ask tenants whether or not they plan to waive their right of first refusal after the notice of intent to sell period and that, should 50% of tenants sign the waiver provided by the Department of Housing, the tenants’ rights will be considered to be waived. Additionally, the updated language specifies that the tenants’ right of first refusal will only be renewed when there is a new buyer and a drop in price of 10% or more.
  • New effective date – The amended ordinance sets March 1, 2025, as the new effective date for T.O.P., allowing time for the City Council to act on these amendments and for the REALTORS® and sponsors to inform all impacted parties and the public of the changes.

Other sections, including changes to the demolition surcharge, went into effect on October 9, 2024, and continue to be in effect and under enforcement. 

FAQs

What does the Northwest Side Housing Preservation Ordinance do?

The Northwest Side Housing Preservation Ordinance promotes housing affordability, mitigates displacement, and protects the historic character and diversity of our neighborhoods by:

  • Protecting two-flats, three-flats, and four-flats from demolition via a demolition surcharge. Developers wanting to demolish multi-family apartment buildings have to pay a surcharge of $20,000 per unit or $60,000 per building, whichever amount is higher. The dollars from this surcharge go to the Chicago Housing Trust and the Here To Stay Land Trust to build and preserve affordable housing in our communities. 
  • Protecting naturally occurring affordable middle housing by disallowing the conversion of two-flats, three-flats, and four-flats to luxury single-family homes on blocks where most buildings are multi-family apartment buildings.
  • Providing tenants with the right of first refusal and first opportunity to purchase their building when it goes on sale. Similar provisions have allowed tenants to buy their homes across the United States.
  • Legalizing the construction of new two-flats by-right in zones currently only zoned for single-family homes.

What are the boundaries of the Northwest Side Housing Preservation Ordinance?

The ordinance's provisions protect housing and residents in the area bounded by Addison Street, the North Branch of the Chicago River, Western Avenue, Division Street, California Avenue, North Avenue, Kedzie Avenue, Hirsch Street, Kostner Avenue, Fullerton Avenue, and Pulaski Road.

What is a tenant right of first refusal?

This ordinance established a tenant right of first refusal provision that requires owners of rental buildings to provide advanced notice to tenants if they intend to sell the building. A tenant right of first refusal means that the tenants in a rental building have the right to match any offer made by a third party to purchase the rental building they live in. The right to match offers and purchase a building by existing tenants is known as Tenant Opportunity to Purchase.

Do I have a right of first refusal under this ordinance?

All renters living within the boundaries established in the ordinance will have the right of first refusal once this ordinance goes into effect on March 1, 2025. 

How does the Tenant Opportunity to Purchase work?

The right of first refusal and Tenant Opportunity to Purchase depends on the number of units in the building. The Tenant Opportunity to Purchase is modeled off of timeframes typical of the local real estate market. 

For buildings with one or two units:

  • The owner must give tenants 30 days' notice of their intent to sell before listing the property for sale.
  • Following the 30-day notice period, the owner must notify tenants of any third-party offers they receive that they intend to accept.
  • Tenants have 15 days from receipt of notice of a third-party offer to exercise their right of first refusal by notifying the owner in writing of their intention to match the third-party offer. Written notice of intent to exercise right of first refusal must be accompanied by a pre-approval and earnest money. The ordinance caps the amount of earnest money a seller can require at 5% of the purchase price. 
  • An offer to purchase can be made by one tenant; the formation of a tenant association is not necessary.
  • If the offer is accepted, the tenant(s) have 60 days to secure financing and complete the closing process.

For buildings with three or four units:

  • The owner must give tenants 30 days' notice of their intent to sell before listing the property for sale.
  • Following the 30-day notice period, the owner must notify tenants of any third-party offers they receive that they intend to accept.
  • Tenants have 30 days from receipt of notice of a third-party offer to exercise their right of first refusal by notifying the owner in writing of their intention to match the third-party offer. Written notice of intent to exercise right of first refusal must be accompanied by a pre-approval and earnest money. The ordinance caps the amount of earnest money a seller can require at 5% of the purchase price. 
  • The tenants’ offer to purchase must be made collectively by 51% or more of the current tenants in non-owner-occupied units.
  • If the offer is accepted, tenants have 60 days to secure financing and complete the closing process.

For buildings with five units or more:

  • The owner must provide 60 days' notice to tenants of intent to sell before listing the property.
  • Once the property is listed for sale, the owner must provide notice of any offer they receive and intend to accept to the tenant association or, if none exists, to each tenant.
  • After receiving this notice, tenants have 90 days to form a tenant association and exercise their right of first refusal by giving the owner written notice of their intent to match the third-party offer received. Written notice of intent to sell must be accompanied by a letter of intent from a lender or community organization and earnest money. The ordinance caps the amount of earnest money a seller can require at 5% of the purchase price.
  • The tenants' offer to purchase must come from a tenant association representing residents of at least 75% of occupied units.
  • The tenant association has 120 days after providing the owner with notice of intent to exercise their right of first refusal to secure financing and complete the closing process.

Are there exceptions to the Tenant Opportunity to Purchase?

Yes. There are exceptions in the ordinance that allow a property owner to transfer ownership of their property without triggering the tenant right of first refusal: 

  • When ownership is transferred to a close relative (e.g., a spouse, domestic partner, parent, sibling, grandparent, aunt, uncle, niece, etc.);
  • A transfer made in connection with any bankruptcy proceeding, tax sale, or tax foreclosure;
  • A transfer pursuant to a court order or court-approved settlement;
  • A transfer by eminent domain;
  • A transfer directly caused by a change in the form of entity owning the rental property;
  • A transfer of ownership into a trust.

I want to exercise my right of first refusal–do I need to form a tenant association?

In buildings with five or more units, tenants will need to form a tenant association in order to exercise their right of first refusal (see “What is a Tenant Association Under This Ordinance?” for more information).

In buildings with three or four units, tenants do not need to form an association to exercise their right of first refusal, but any offer to purchase must come from at least one tenant in at least 50% of renter-occupied units. In buildings with one or two units, an individual tenant can exercise their right of first refusal; however, if the building has two rental units and residents of both units are interested in purchasing the building, they would need to do so collectively. 

Can A SELLER OR THEIR AGENT ASK TENANTS IF THEY INTEND TO WAIVE THEIR RIGHT OF FIRST REFUSAL?

Under the ordinance, a property owner cannot ask a tenant if they intend to waive their right of first refusal during the initial notice of intent to sell period (30 days for buildings with one to four units and 60 days for buildings with five or more units). Once this initial period ends, a property owner may ask tenants if they intend to waive their right, but may not require that they do so.

What is considered a tenant association under this ordinance?

For this ordinance, a tenant association means that at least one resident of at least 50% of the occupied rental units in a building of 3 to 4 units and 75% of the occupied rental units in a building with 5 units or more has given written notice to both the Department of Housing and the property owner of their intent to form an association within the right of first refusal period. The Chicago Department of Housing will publish the tenant association form by October 9, 2024. Please note: As a tenant, you don't have to wait until your building is listed for sale to form a tenant association.

What resources exist to help tenants form an association?

For guidance on organizing a tenant association, please contact Autonomous Tenants Union (ATU) by calling (872) 216-5288, emailing [email protected], or visiting their website at https://www.autonomoustenantsunion.org/resources. 

How are the demolition surcharge funds be collected, and how are the funds spent?

The City of Chicago, through its permitting process, will assess the appropriate fees based on the demolition permit required for the lot. Before receiving a demolition permit, developers must submit a completed Dwelling Unit Demolition Surcharge form for approval to the Department of Housing at [email protected]. Demolitions subject to this ordinance and its accompanying surcharge will need to submit documentation of the number of dwelling units in the building, such as water or other utility records or property tax records, as well as a paid invoice from the Department of Finance. Fees collected are public information and deposited in the City of Chicago’s Affordable Housing Opportunity Fund; the Department of Housing then transfers these funds to the Chicago Housing Trust. The Chicago Housing Trust uses these funds to acquire properties and works with community partners like the Here to Stay Land Trust to find income-eligible homebuyers. Land trust properties receive tax benefits and come with resale restrictions, ensuring that the properties are kept affordable in the long term. During the three-year pilot period, the 606 and Pilsen Demolition Surcharge ordinances generated $120,000 in funds for the Chicago Housing Trust. 

Why is this ordinance needed?

Many long-term low-and-moderate income residents and families in the neighborhoods covered by the Northwest Side Housing Preservation Ordinance have been displaced, and even more are struggling to remain in our communities as housing costs rise and the stock of naturally occurring affordable housing – mainly the critical two- to four-flat housing stock – is being lost due to demolition and deconversion into luxury single-family homes. Data from the Institute for Housing Studies at DePaul University (IHS) highlights the importance of this housing stock to long-term low-and-moderate income families in these neighborhoods, finding that:

  • Latine-headed households are more likely to rent units in two- to four-unit buildings than any other type of structure.
  • Citywide, 73.4% of all rental units in two-to-four flats are occupied by households headed by a person of color. 
  • 60% of all renter households headed by a person who identifies as Hispanic/Latine live in two- to four-unit buildings (compared to 27% of white renter households).
  • 40% of two- to four-flats contain three bedrooms or more, which is crucial for accommodating larger families and multigenerational households.

This ordinance helps to preserve this housing stock that plays a critical role in providing unsubsidized affordable housing suitable for multi-generational families by establishing a surcharge on permits for the demolition of existing residential buildings, as well as minimum-density requirements on certain blocks to prevent the demolition or deconversion of naturally occurring affordable housing to be replaced with new luxury single-family homes. 

Was the community involved in crafting the Northwest Side Housing Preservation Ordinance? What informed the creation of the Northwest Side Housing Preservation Ordinance?

This ordinance is the direct result of community advocacy and organizing. Logan Square residents advocated for creating the 606/Bloomingdale Trail for over a decade. Unfortunately, shortly after the trail's creation, Logan Square residents near the trail witnessed rapid displacement, primarily driven by the demolition of existing housing and conversion of two- to four-flat buildings around the trail into luxury single-family homes. Additionally, these new luxury single-family homes contributed to higher property taxes. For all these reasons, residents, led by Palenque LSNA (formerly Logan Square Neighborhood Association), advocated for protections to be put in place to protect long-time residents from displacement, protect multi-family housing from deconversion and demolition, and rein in rising property taxes.

Last term, Alderperson Ramirez-Rosa and area alderpeople passed two pilot ordinances to protect middle housing and promote housing affordability and density around the 606 trail. These ordinances – the 606 Demolition Permit Surcharge Ordinance and the 606 Predominance of the Block Ordinance – created a three-year pilot program that established a surcharge on demolition permits for residential buildings of $15,000 per building or $5,000 per unit, whichever is greater, and minimum-density requirements which prohibited new luxury single-family homes on blocks around the 606 trail where a majority of buildings are multi-family. These ordinances resulted from over a decade of organizing by a broad coalition of community organizations led by Palenque LSNA.

Results from the three-year pilot show that these two ordinances have successfully stopped the conversion of multi-family housing into luxury single-family homes while generating $120,000 in revenue for the Chicago Housing Trust. The Chicago Housing Trust provides Chicago families with long-term affordable homeownership opportunities. Data from the Department of Housing found that, following the passage of these ordinances, there were no conversions of multi-family housing into single-family in the area covered by the pilot and that demolitions within the pilot area declined by 88%.

Does this ordinance impact property taxes?

The ordinance aims to rein in rising property taxes by protecting historic multi-family housing from demolition and conversion to single-family homes. Conversion of historic apartment buildings into luxury single-family homes is one of the primary drivers of rising property taxes on the Northwest Side, and this ordinance seeks to curb that trend.

Does this ordinance impact a property owner’s ability to rehab or update their home?

No. This ordinance does not affect a property owner's ability to rehab or update their property, as long as it does not change the existing use of the property. For example, the owner of a single-family home could rehab or update a single-family home to be used as a single-family home, a two-flat can be rehabbed or updated to be used as a two-flat, etc. The ordinance gives owners of single-family homes the flexibility to add a second unit, if they wish. 

Does this ordinance have an environmental impact?

This ordinance helps protect the environment by disincentivizing the unnecessary demolition of still usable buildings, reducing the amount of construction material that ends up in landfills. Additionally, research shows that household emissions are lower in multifamily housing like the two-, three-, and four-flats this ordinance aims to protect. 

What is naturally occurring affordable housing?

The term naturally occurring affordable housing refers to housing that is affordable without receiving any government subsidy and without any legal restriction on what the owner can charge in rent. Naturally occurring affordable housing makes up the majority of the affordable housing in the Northwest side neighborhoods included in this ordinance. In these neighborhoods, naturally occurring affordable housing is found in classic Chicago neighborhood buildings like the family-owned two-flats, three-flats, and four-flats, basement and attic apartments, etc.

What is “middle housing”?

The term “middle housing” refers to the diverse types of housing that are not single-family homes or high-rise buildings, but instead fall somewhere in between. In Chicago, the majority of the middle housing stock comes in the form of two- to six-flats, courtyard apartment buildings, and mid-rise apartment buildings. 

Urban planners often refer to this type of housing as “missing” because zoning regulations often prevent the construction of new middle housing. This ordinance seeks to protect existing middle housing in Northwest Side neighborhoods by making it more expensive to demolish and by changing the zoning code to prevent the deconversion of two-to-four flats into luxury single-family homes. It also seeks to promote the construction of new middle housing by reducing the required lot area per unit to allow the construction of new two-flats by-right. 

How does this ordinance promote density and middle housing?

This ordinance prevents the loss of the critical two-to-four flat housing stock through demolition or conversion into luxury single-family homes. It does so by establishing minimum-density provisions that prohibit the establishment of new single-family homes on blocks where the majority of lots contain multifamily housing and by establishing a surcharge on permits for the demolition of residential buildings. 

Additionally, the ordinance reduces the minimum lot area per unit requirement for properties zoned RS-3 (Residential Single-Unit [Detached House] Districts) within the pilot area (the majority of the residential streets within the covered area are zoned RS-3) from 2,500 square feet per unit to 1,500 square feet per unit to allow the development of a two-flat by right on a standard-sized residential lot.

I have more questions, how can I learn more about this ordinance?

To learn more about this ordinance, please contact the office of 35th Ward Alderman Carlos Ramirez-Rosa at [email protected]. You can click here to download the final substitute ordinance adopted by the Chicago City Council on September 18, 2024. Lastly, we expect the Chicago Department of Housing will issue additional materials related to the implementation of the ordinance the week of Wednesday, October 9, 2024.

THE 35TH WARD OFFICE IS STILL LOCATED AT:
2934 N. Milwaukee, Unit C, Chicago, IL 60618
Hours: Monday-Friday, 9 am to 5 pm
Call or Text: 773.985.3510
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